Strategic Change And Financial Flexibility

Due to the uncertain environmental characteristics of the global environment and the constantly strict credit risk management policies,enterprises are faced with more stringent financing standards.How to flexibly respond to the changes of external environment,resist risks and seize opportunities is the eternal theme of enterprises.At present,the focus of China's supply-side reform lies in the adjustment of enterprise strategic positioning and resource allocation plan.In the process of strategic reform,resource demand increases and deviates from the original development model,which brings certain impact and volatility,and increases the risk of uncertainty.In addition to strict credit policy constraints,the ability of enterprises to cope with uncertain cash demand and investment opportunities in the future is particularly important,namely,financial flexibility.How will a change in strategy affect financial flexibility? Current research has paid little attention to the relationship.When some studies consider the operational risks and uncertainties brought by strategic changes,they believe that enterprises will maintain a high cash holding level to cope with shocks,but the cash holding level is not the purpose,but the maintenance of better financial flexibility is the purpose.Therefore,the research focus of this paper is how the strategic change of enterprises will affect the financial flexibility of enterprises.In this paper,selected annual report data of strategic change index of listed companies greater than zero from 2013 to 2018 are used as the sample to conduct an empirical analysis by constructing an regression model between the degree of strategic change and financial flexibility.The degree of strategic change is measured by the composite measurement method of six key strategic dimensions and the financial flexibility is measured by the speed of capital structure adjustment.The effect of the quality of internal control on the relationship between strategic change and financial flexibility is further investigated.Combining the theory of internal control and the theory of strategic management,this paper discusses the influence of strategic change degree and enterprise flexibility and its internal mechanism.It is found that when other conditions are certain,the enterprise strategy influences the prudent motivation and preventive motivation of the enterprise to improve financial flexibility by affecting the operation risk and agency behavior,and improves the level of cash holding and residual debt capacity,so as to improve financial flexibility.The degree of strategic change has a positive effect on financial flexibility,which is more obvious when the quality of internal control is low.Further considering whether the impact of strategic change on financial flexibility is different under different property rights,it is found that the impact of strategic change on financial flexibility is more obvious in state-owned enterprises.This paper mainly has the following two innovative points:(i)this paper explores the relationship between corporate strategic change and financial flexibility,and inspired a new research perspective and empirical basis for the study of financial effects of strategic change.(ii)in combination with previous studies,the target capital structure adjustment speed is adopted to measure financial flexibility,which overcomes the deviation caused by the one-sided method of measuring financial flexibility of enterprises with a single or two indicators combined in previous studies,and improves the accuracy.The main research contributions of this paper are as follows :(i)combining the theories of strategic management and internal control to discuss the influence of strategic change degree on enterprise flexibility and its internal mechanism,so as to put forward a novel theoretical perspective and empirical basis for the study of financial effects and economic consequences of strategic change.(ii)the method of measuring the financial flexibility of enterprises from the dynamic perspective and its financial significance is added,which makes up for the deficiency of measuring the financial flexibility with a single index.(iii)it provides a path and method for enterprises to better cope with opportunities and risks in the process of strategic transformation under the new normal economy;In the process of enterprise development and reform,financial flexibility is needed to cope with operational risks,uncertain demands and investment opportunities,which can help inspire the government to take positive measures and give full play to the role of financial flexibility in enterprises.In addition,it better reveals the risks and demands in the enterprise's strategic change,and provides Suggestions for creditors to make reasonable use of capital in the case of information asymmetry.